TradingScreen and NYSE Euronext are sweetening the deal on their on-exchange corporate bond trading offering by giving free access to the buy-side.
For the first three months, NYSE Euronext will finance the software licences for qualifying institutional investors to view the European Central Order Book (ECOB), which displays liquidity on NYSE BondMatch and TradingScreen’s soon-to-be-launched fixed income multilateral trading facility (MTF) Galaxy.
The intention is to entice buy-siders by letting them view liquidity on NYSE BondMatch and Galaxy order books even before they decide to connect.
“This new European trading platform not only offers compulsory clearing and settlement solutions, it also improves transparency and liquidity by being open to all, whether on the buy side or on the sell side,” said Nathalie Masset, director, European debt markets, NYSE Euronext. “When we launched NYSE BondMatch in July 2011, we pointed out that it would take at least two years to assess how the market would respond to this initiative, because it means changing trading behaviours. By improving the transparency of bond prices, the platform will ultimately raise market liquidity. Once transparency in trade prices has reached a certain level, the market tends to become more liquid.”
If institutional investors decide to trade on the ECOB, their screens will simply be reconfigured from ‘view’ to ‘trading’ mode and licensing costs will shift to the investor’s market-member intermediaries.
The ECOB virtually consolidates order books of bond markets meeting the so-called Cassiopeia criteria. The Cassiopeia criteria was developed in 2010 by the French economic ministry’s committee for developing more European secondary bond platforms.
The Galaxy MTF will accept only firm orders and aggregates them in a global order book with prices accessible to all participants. Post-trade information and transaction records are made available publicly.
NYSE BondMatch is a new MTF that lets qualified debt market participants trade euro-denominated corporate, financial and covered bonds on a transparent order book with firm orders. BondMatch aims to provide liquidity and transparency through an order book with firm orders, pre- and post-trade reporting and clearing and settlement solutions.
“NYSE BondMatch was defined by its participants – asset managers, insurance companies, banks, brokers – and based on the observed failures of the existing OTC model,” said Masset. “Given the new [MiFID II] regulation, banks can no longer play their market-making role like they used to do. We must move to a model where institutional investors have a much greater role to play.”
Masset said in addition to the new partnership with TradingScreen, NYSE BondMatch has also introduced an ‘intermediation’ status for buy-side participants that preferred to send their trading flow through an existing NYSE BondMatch member. This status was created just before NYSE BondMatch was launched, at the request of institutional investors.
The venue operator is also in the middle of a capacity program upgrade for its core equities and bonds trading systems. Equities, exchange-traded funds and bonds listed on NYSE Euronext regulated cash markets will be moved to upgraded infrastructure on 6 August.